Top cocoa grower has to end subsidies for $3.5 bn IMF loan

By Baudelaire Mieu

Ivory Coast will need to replace government subsidies with targeted cash transfers as one of the requirements to get final approval for its $3.5 billion support package from the International Monetary Fund. 
 

The world’s biggest cocoa producer, which secured IMF staff-level agreement for the 40-month program last month, will need to put an end to broad-based fuel and food subsidies, Ivory Coast’s IMF Resident Representative Kadima Kalonji told reporters in the commercial hub of Abidjan Monday.

The government has committed to replacing the subsidies with targeted transfers and widening the tax net, he said. Ivory Coast also has room to increase its Value Added Tax, which stands at 18%, and review corporate tax exemptions, he said.

The war in Ukraine resulted in higher food costs prompting the government of President Alassane Ouattara to spend more to keep prices of fuel, electricity and bakery products under control in a nation where about 40% of people live on less than $581 a year. That’s robbed the administration of fiscal space to spend on development. 

Ivory Coast’s public debt is expected to increase to 63.3% of gross domestic product this year from 56.8% in 2022, according to IMF data. 

The yields on the nation’s dollar securities due March 2028 rose nine basis points to 7.74% as of 2:57 p.m. in London.

Ivory Coast only has “a moderate risk of over-indebtedness” and won’t require to restructure its debt to access the funding, Kalonji said. 

That’s in contrast to neighboring Ghana, which is restructuring its liabilities to bring its debt-to-GDP to 55% by 2028 and get IMF board approval for a $3 billion bailout package. An earlier IMF estimate put Ghana’s 2022 debt-to-GDP ratio at more than 100%.

“Ghana’s situation is very different,” Luc Eyraud, who heads regional studies at the IMF, said in French. The international community is giving support to Ghana both through the IMF package and the fiscal space created by a debt restructuring, he said. The IMF is waiting on financing assurances from the country’s official creditors before making a final decision on the program.

“You can’t compare a country that’s just getting IMF funding to a country that’s getting IMF funding in addition to a debt restructuring,” said Eyraud, when asked about the size of Ivory Coast’s funding package relative to Ghana’s.